Mississippi Windpool Rates Going Down. Commissioner Chaney Makes Good on his promise to Coastal Residents

Today is a very busy news day with unrelated but very newsworthy items. The windpool premium reductions are one of a three news stories we are tracking related to Katrina issues, the other two being State Farm further restricting coverage in Alabama and the Hancock County press conference today involving Haley Barbour, Gene Taylor and Roger Wicker.

Yesterday afternoon we were greeted with breaking news that the Mississippi windpool was reducing rates for coastal residents.  I read today’s Sun Herald story and was reminded of Commissioner Chaney’s Insurance Forum on March 4. Though I have not recapped either that forum or Gene Taylor’s Issues+Answers lecture on February 29th as both were lost in the corporate tax shuffle I was reminded of a post I penned on the Yahoo! Allstate Message Board about Commissioner Chaney’s Forum when I read Anita Lee’s story today.

Mr Shumaker with the wind pool was also enlightening but also exhibited what is wrong with the current system. The wind pool was not created to be palatable for it’s members but neither was it created to hold wind insurance for people living in Pearl River County. I got the impression Mr Shumaker didn’t understand how much structural change has occurred in his market since 8-29-05.

My biggest problem with the wind pool is the lack of transparency surrounding it’s operations.

Today we fast forward to the today’s windpool story and find we have been paying above market commissions for wind insurance; a situation currently being addressed via arm twisting from Commissioner Chaney’s office. We wish to express our thanks to Mr Chaney for helping drive positive change on the windpool. Here is today’s Sun Herald story:

Under the latest proposal, wind pool rates would drop 8 to 10 percent for homeowners south of Interstate 10, and 7 to 18.5 percent for businesses.

If approved, the rates would apply to policies purchased or renewed on or after June 1.

The board of the wind pool, insurer of last resort for six South Mississippi counties, is proposing the rates to Insurance Commissioner Mike Chaney. Chaney said Wednesday he will approve the lower rates.

“My job as commissioner is to get the lowest rates possible for the consumer,” Chaney said, “and I intend to do that.”

Chaney said he also will ask the wind pool board to reduce from 15 to 10 percent the commission agents receive for writing wind pool policies. He said most other states with wind pools have a 10 percent or lower commission. The lower commission would save the wind pool $2 million a year, he said.

Chaney said the wind pool could use the savings to buy more coverage to cushion itself from catastrophe. The coverage, called reinsurance, was costlier after Katrina but prices have come down, another reason the wind pool board is proposing lower rates.

The board expects to buy reinsurance with money the Legislature provided in hopes of lowering insurance costs for South Mississippi residents. Gov. Haley Barbour is expected to sign the bill providing an additional $25 million for reinsurance.

A rate reduction of 11.2 percent is proposed for Coast residents north of Interstate 10. Policyholders in the upper three South Mississippi counties would see even greater reductions: almost 21 percent for residents and 37.6 percent for businesses.

Proposed rate reductions

Proposed wind pool rates have not been approved and are not available yet. As currently proposed, the rates would apply to policies purchased or renewed on or after June 1:

• Effect of rate changes for the owner of a wood-frame house between the beach and CSX railroad tracks:
Pre-Katrina rate – $790 per $100,000 in coverage.
Current – $1,505 per $100,000.
Proposed – $1389 per $100,000.

• Wood-frame house north of I-10:
Pre-Katrina – $689 per $100,000.
Current – $1,307 per $100,000.
Proposed – $1,160 per $100,000.